Hello all
After asking Demented for help on how to place in game textures onto custom items
i have made this short tutorial in both our names "wraith & Demented" we are people who like to help others.

Step 1
Select the side you want to skin, like in my example below.

Step 2
Find the texture you want to use from the game textures, when clicking on it you will see it wrong,
too big or wrong way around, like the image below.

Step 3 and 4
Click on the Paint Brush Icon "custom uv mode" doing so you will see a little box appear around the
texture you picked !

Step 4 extra help ^^ see the little box as 4 square dots ! move them to the edges of your
texture where you would like them to appear at the same time look at the hi-lighted main area on the custom item !
this will show you whats going on.
also the image maybe back to front or upside down just move the dots around or use the icons below the paint brush
icon, when you happy with it. hit the save.
Updated with next part below to add an icon to your image folder
have fun

Step1
Add the custom item you just skinned by using the icon with the little tree.

Step2
Goto the media tracker and select intro - edit.
Zoom around with the arrows till you are happy with the image.

Step3
Hit the JPEG Icon hi lighted above in RED. Rename the "shot name" to something you will know then hit ok and press any key to save it.

Step4
On the main screen goto the little tree icon again and also select the spanner to the left side,
hi light your item, some boxes drop down on the left !
select the 2nd box down Spanner icon the find the image name like in the second "image below"

click open a little box/image appears do not worry if it got blur.
Click on OK then hit save and exit.

I might add a couple more little notes:
I think the textures aren't really wrong when you first apply them but more that they are at an optimal size and ratio for application, and oriented to the orientation of the object. Nonetheless, they usually do need adjusted.
(Maybe angry_duck or niebo26 could offer a little feedback on that).
Here's a link with some other helpful notes that they have posted:Custom Item Editor Q&A
...And, here's another question & answer about placement parameters : Custom Objects: Cubicsystem

Nice notes on creating icons too BTW.
(I do wish the ingame screenshot button worked still. It would save time.)
& as you said:

Don't want to flood the useful tutorials that started there but i'm just passing by to confirm what Demented said : when the tool obviously doesn't know how you want to apply a material, it assumes that you'd like to have the proportions kept while filling the maximum of what you selected on your Crystal ^^
That's like an optimized "placeholder" if you prefer.

Also, yeah, the Mesh Modeler is still in a WIP state so things may change a lot in the future ^^

Anyway, those tutorials are a very good idea ! Thank you for doing so, i hope it'll help people to get introduced to item creations and that we will have more items like the Lagoon F1 pack Demented made

Thank you Niebo26, and thank you Wraith for the graphic example. That really makes it a lot easier to visualize what to do.
Niebo, if you're still watching, would you mind explaining for us a little more what the different placement parameter settings do? Most I figured out but there are a few I'm just not sure of.
Also, your last comment really made my day!

I think it can be any dimensions and will be scaled automatically, but the icon will be a square so keeping even dimensions is best.
I think anything over 64x64 should be sufficient. I usually make mine (if I want them customized) around 250x250 but that's just so I can see the details before the game scales them down.
If you use unequal dimensions (IE: 320x240 or something) your icon will not be stretched square but will retain its original aspect and scaled down to fit the longest side.
I'm not sure about the format limitations but I usually use jpg files.